MCOL Blog

Capitation and Medical Homes Or Is this the return of the Staff Model HMO?

While Primary Care seeks new ground as medical homes and insurers look for ways to share risk between providers and insurers using global/tied to episodes of care, we are reminded of the original foundation of HMOs in the early 1970s.

In the original HMO Act of 1973 the federal government intended to encourage formation of group practices through grants and loans. The promise of assembling these efficient prepaid group practices was to have them paid on a capitated basis allowing for a margin if these groups came in under the capitation rate. The intention was to have PCP groups receive full cap and “provide or arrange to provide care for a voluntarily enrolled patient population in exchange for a fixed periodic payment.”

Thus, the original definition of an HMO in the early 1970s applied to a broad variety of delivery systems sponsored by new and existing medical groups.

In today’s world, Primary Care salaries are flagging and capitation is split to sub cap for PCP, specialty and hospitals. So instead of a full payment per episode PCPs get a small amount for a couple of office calls.

Once reimbursement split, it was further split by parts A, B, C and D of Medicare, and then the original value of PCPs was also split. The Primary Care services became a commodity as PCPs were convinced over time that they had no hope of effectively managing primary, specialty, hospital and ancillary services.

They did not have knowledge of claims and information systems, severity measurement tools or care standards and guidelines to shoot for.

In short they were flying blind and this meant they would eventually lose money unless they had a health plan partner to manage all this for them. The successful plans (Marshfield, Gisenger, Lovelace, Kaiser and Harvard and Tufts) all built an insurance partner that they owned and, as such, were able to turn this process into an asset to build market share and compete with other insurers who eventually entered the market with loose-knit networks and PPO arrangements that were HMOs – but in name only.

These anti risk models failed one after another, while those that truly did manage care, reorganized and did the work to build a care system that was fully integrated with the reimbursement system. These made whole dollars for successful care and redeployed savings into these medical groups to hire staff, buy equipment and expand the reach of their practices.

Medical Home

So where do we go from here? Medical homes, a new conceptual formation of a medical practice, recently emerged in the literature.

These homes are hailed by government and practitioners as a more comprehensive approach to Primary Care and Primary Care management. Some of these homes emerged as practices newly forming out of old hospital owned practices and some are forming with insurers as sponsors, seeing the need and the opportunity to truly change care delivery but only by becoming a provider.

This is a switch away from the IPA and network models. Employed physicians exclusively work for the health plan, and are indeed employees, insulated to the extent possible by employer-employee relationships, or in some cases by the medical group that the insurer partly owns. Insurer owned medical groups have been around in the worker comp area and also with the resurgence of interest by manufacturers owning PCPs as the company doctor.

The savings for insurers and employers is obvious when the PCP builds a referral network of specialists and hospital services that are only needed when and if the PCP cannot perform the service directly.

Recent expansion of CVS, Target and Wal-Mart into the Primary Care area shows how needed the services are. But again these professionals treated as a commodity leaves much to be desired in terms of continuity of care, so the medical home has been created and is a new definition...

• each patient receives care from a personal physician;
• the personal physician leads a team of providers who are responsible for a patient's ongoing care;
• the personal physician is responsible for the "whole person";
• a patient's care is coordinated across the health system and community;
• quality and safety are hallmarks of the practice;
• enhanced access to care is offered through open scheduling, expanded hours, and new care options such as group visits; and
• the payment structure recognizes the enhanced value provided to patients.

Newly developed NCQA standards for these homes as credentialed contractors for Bridges has furthered the interest by payers to link up with PCP.

Capitation

On January 22^nd the Boston Globe announced that Blue Cross would be returning to capitation. The spokesperson for the Blue Cross organizations stated that it was more of a globally packaged program but, as with most reimbursement schemes, there needs to be a top line and a bottom line of reimbursable dollars to make the cost predictable for insurers to construct premiums.

Although the “one size fits all” capitation calculation of the past created large controversies over what to do with sicker patients, the direction capitation has been going is much more towards a flexible dollar amount tied to diagnosis.

This risk adjusted amount based upon the patient’s health status, diagnosis, overall age and complications, seems to make more sense as patients with a greater burden of care needs are given a budget for their providers that reflects this greater need.

This amount also reflects the broader variety of services from diagnosis to a plateau of healing following generally accepted guidelines. These episodes of care are gradually replacing the word capitation but in fact represent a risk model and not to exceed cost for providers. So, again the providers do have some risk to make sure they are prescribing necessary outpatient care and hospital services.

The follow-up care in many of these episodes is a tremendous value as physicians, both primary and specialty, are financially rewarded for follow-up care and a form of case management reporting that goes back to the insurer and the attending physician.

As we see further risk adjustment play an important role in performance payment systems, we see PCPs being able to operate medical homes on a salary plus performance incentive thereby sharing in savings created through their own accurate diagnosis and care management skills.

To date FFS and former capitation models offered little savings back to PCPs, especially for seniors who took the physicians and staff extra time with care and administration. As Medicare experiments with risk adjusters for the chronically ill population and private insurers begin using a form of episodes of care to manage the commercial population, we see that research on guidelines will improve as will outcomes analysis using comparative economics.

End result

What this means for health plans and underwriting is that, with some work, their analysis of health assessments and patients’ previous illnesses will allow plans to forecast with some certainty the potential ailments of a prospective population. Rather than exclude this population for coverage, reallocating care management resources in the direction of stabilizing theses patient or, in some cases, reversing the disease course as is being done in heart disease and diabetes, will be the norm.

For providers, especially PCPs, this means a welcome source of additional payments for the fragile and chronically ill population of Medicare eligibles and a return to a vital role as the front entry point for most care. This role is expanded in the medical home, and a certification as a home differentiates these professionals in the marketplace.

For patients who seek more transparency in their doctor’s pricing and performance, the distinction as a medical home is again a meaningful message to send to new and existing patients that this practice is certified as best practices for Primary Care. Further, this is important as the package or episode of care is driven off of accurate diagnoses.

Payment and structure can come together under this medical home concept, but we still have much to learn about how consumers must also see the Primary Care physician as the essential key to open the delivery system in a productive but prudent manner.

o      You want me to believe that it’s confidential, when I’m reading every week about health insurance data privacy breaches.

o      And you want me to celebrate that it’s “free,” when my premiums and copays have never been higher.

• The relationship between OOP costs, medical errors and drug interactions
• The higher risk of unidentified ME/DI among patients with multiple conditions/polypharmacy
• The opportunities for improved outcomes that multiple conditions can obscure
• The importance of a “medical home” in reducing ME/DI
• What a health coach actually does, and indications that having a coach might help; how the coach and the medical home can support each other

• Why I am on two drugs that are supposedly “contraindicated” in combination?
• Does anyone at the MCO know or care about all that treatments I’ve had?
• Isn’t a health coach going to refer me to a doctor for the tough calls anyway?
• How will a stranger get me to do all the things I already know I should do?
• Why can’t the health plan just find me a better physician?

1. Is it clear what you are asking members to do?
2. Is a coherent value proposition for them to take this action presented and are potential objections addressed?
3. If members to whom your request is directed are not appropriate candidates, how will they know?
4. Is there a high ratio of important content to buzzwords like “personal,” “healthy” and “wellness”?

What’s Going on at ChangeNow4Health:

We’ve written before about ChangeNow4Health, the open coalition committed to improving the nation’s health care system through the facilitation of action. Below is their latest press release, which announces their Innovation xChnage, inviting and even funding new ideas on how to fix health care today:

ChangeNow4Health, an open coalition committed to improving the U.S. health care system, today launched a series of new online programs to further drive dialogue and transformation in the health care system. Announced at the World Health Care Congress in Washington, D.C. , these programs range from Health Expert Blogs led by national health care consultants to the new “Innovation xChange,” which is an ongoing campaign designed to invite and reward new ideas that address issues in our current health care system.

“ Our health care system is seriously dysfunctional and it’s time we all come together and do something about it,” said Jacque Sokolov, a nationally recognized health care consultant and one of ChangeNow4Health’s founding partners. “T he U.S. spent almost $2.2 trillion in 2007 [1] , but we are not seeing corresponding improvements in quality of care. ChangeNow4Health is designed to be an online, real-time catalyst and clearinghouse that action-oriented individuals can use to propose solutions and start solving problems now.” [ [1] “Health Spending Projections Through 2017: The Baby-Boom Generation is Coming to Medicare,” Health Affairs 27, no. 2 (2008): w145-w155 (published online 26 February 2008)]

ChangeNow4Health is dedicated to improving the way consumers receive, and the industry delivers and administers health care services. The coalition seeks to incubate, expand and make available solutions that are working in one part of the industry and can bring positive change to others.

Through the Innovation xChange, ChangeNow4Health is inviting all participants in health care system to submit practical ideas and solutions. All participants, from providers and health plans to consumers and government, can join in the discussion by simply logging on to www.ChangeNow4Health.com and submitting their ideas in the Innovation xChange. Solutions can be entered in the following four categories:

1. Helping Consumers Make Smarter Health Care Decisions

2. Simplifying the Business of Health Care

3. Preventing Sickness and Maintaining Health

4. General Innovations in Health Care

A panel of industry experts will evaluate all ideas based on criteria, including feasibility for implementation, potential to yield tangible, measurable results and to bring about meaningful change in a reasonable time frame.

All entries submitted on www.changenow4health.com will be open to voting by the coalition’s online communities. The top 20 entries will be published in the ChangeNow4Health e-book, Tomorrow’s Health Care, and finalists will be awarded up to $10,000. (Up to three entries will be awarded $10,000.)

In addition, Humana Inc. (NYSE: HUM), one of the founding members of the coalition, will consider the possibility of a joint venture to incubate the winning idea and bring it to reality through the company’s Innovation Center. Winners will be announced by Aug. 31, 2008.

“The basic premise behind this Innovation xChange is that no one entity can fix the system and a good idea can come from anyone,” said Beth Bierbower, vice president of Product Innovation, Humana. “ The technology and structure of the Innovation xChange allows anyone, regardless of age, sex, professional background, to be part of a solution. The virtual forum and workgroups encourage collaboration, focused thinking and the development of easily actionable solutions.”

In addition to the Innovation xChange, the coalition announced two other online programs to drive dialogue and build support for various solutions. These include:

· National Healthcare Expert Blog Topic Forum : Starting June 1, Dr. Jacque Sokolov, a nationally recognized health care consultant, will launch a new blog bringing together some of the nation’s leading health care thinkers to discuss critical health care issues in one common forum. The blog will feature prominent health care experts and touch upon various topics, including the need for successful quality initiatives, hospital-physician productivity enhancement and a sustainable national health care financing model.

· Point-Counterpoint : To further spur discussions in various ChangeNow4Health communities, the coalition will launch a new Point Counterpoint forum where prominent health care bloggers and experts can put forth dissenting opinions and build actionable consensus on key solutions. During each online forum, two health care bloggers will present differing positions on an issue and members can join in with their opinions.

For more information or to join in the conversation, please visit www.changenow4health.com.

What's the current state of things in the Convenient Care Industry?

After attending two sessions on retail medicine at the World Health Care Congress today, here's what we found out:

John Agwunobi, MD, EVP Professional Services for Wal-Mart shared the following statistics for Convenient Care visits at Wal-Mart locations, through their various contracted providers:

• adults comprise 79% of visits, 21% of visits are for children
• 55% of patients have no insurance coverage
• Patient surveys indicate, had the Wal Mart convenient care location not been available, 40-50% of patients would have seen a primary care physician; 20-35% of patients would have used an urgent care facility; 10-15% would have gone to an ER; 5-10% would have foregone treatment
• 90+% of patients indicate overall satisfaction
• 25-40% of visits are for immunizations & screenings; and 60-75% of visits are to treat common illnesses

Doctor Agwunobi also discussed the Wal-Mart $4 Generic Prescription program, which is offered to all Wal-Mart customers and is proactively promoted through the Convenient Care locations. The program involves 361 generic prescriptions covering up to 95 percent of prescriptions written in the majority of therapeutic categories. Nearly 30 percent of $4 prescriptions are filled without insurance. The $4 prescriptions now represent approximately 40 percent of all filled prescriptions at Wal-Mart.

Web Golinkin, President and CEO, of RediClinic discussed RediClinic customer experiences, noting that RediClinic is a partner of Wal-Marts. Mr. Golinkin is also President of the Convenient Care Association and shared the following insights regarding the Association and industry as a whole:

• There were 150 clinics when the Convenient Care Association founded less than two years ago to more than 950 today nationwide, with 1,500 projected by the end of 2008.
• Overall, the clinics have treated more than 2.5 million patients in 36 states
• Surveys indicate 16% of consumers have tried a clinic and between 34 to 41% say they intend to

Golinkin stated the potential obstacles or events that could slow industry growth would be if:

• The industry suffered future systemic clinical quality issues
• A shortage and/or increased cost of Nurse Practitioners (NPs) and Physician Assistants (PAs) occurred
• If various states continue with additional regulatory impediments (clinic licensure requirements, restrictions on NP/PA scope of practice and prescriptive authority, physician oversight requirements, corporate practice of medicine prohibitions, etc.)
• If increased Operator/business model failures occur. He noted that there have been some failures, commented that this should be expected with any industry having relatively lower barriers to entry but higher ongoing working capital requirements. He felt there will be a shakeout with consolidation.

Michael Howe, CEO of MinuteClinic, states their organization's strengths include:

• They are "Right Size” engineered for efficiency and high quality
• Proprietary Electronic medical record system embedded with standardized “best practice” protocols
• Facilitates measurement of results and continuous quality improvement
• Interoperability drives continuity of care back to the Medical Home
• Consumer friendly - with convenient locations in consumer pathway, and “Lifestyle conscious” hours and “walk in” scheduling
• “High touch” capability of practitioners drives compliance
• Patient Referral system facilitates the creation of “Medical Homes”when lacking

He cited an independent external research study conducted by Market Strategies in April 2007 indicating a patient satisfaction rate, as well as the percent likely to recommend, of 97%. He noted that MinuteClinic adheres to national standards of practice guidelines, (which have been adopted by their Association) but also is the first retail health care provider to be Joint Commission accredited.

Howe also cited a peer reviewed study from September 2005 through September 2006 of 57,000+ MinuteClinic evaluations of acute pharyngitis, looking for outcome measures to include adherence to best practice treatment guideline in presence of negative or positive RST, use of back up confirmatory strep culture testing in presence of negative RST, and documented rationale when antibiotic was prescribed in presence of negative RST. The study indicated an overall adherence rate of 99.15%.

2008: Actionable Transformation

Three important themes are influencing health care marketing in 2008–customer narrowcasting, Big Truth messaging and new media. Addressing these challenges will form the framework for successful marketing efforts. I’m forecasting this not only as it relates to healthcare, but in the context of a consumer marketplace undergoing massive transformation in the way people are approached, courted and led into the sales cycle.

Customer Narrowcasting

Alternatively known as market segmentation or niche marketing, customer narrowcasting takes a business’ focus to highly-defined, targeted customer segments. Whether formulating an annual marketing plan, reengineering product messaging or planning a media buy you can't do it without knowing your customer.

Market leaders are embracing a customer-centric philosophy that puts products and services into distinct market segments, each with narrow customer definitions. In this setting, the customer is viewed as the central asset. Products and services are tailored to unique needs of each customer group, relying on a range of segmentation profiles including demographic, psychographic and lifestyle.

The key to the customer-driven “black box” is data. Gathering, analyzing and interpreting information that allows you to understand variations among customer segments and develop a snapshot of your most desirable targets. It’s the practice of dividing people into groups or cohorts that are similar in specific ways relevant to key marketing indicators—age, gender, income, interests, attitudes and spending habits. The more you know about prospects needs and preferences, the more you’ll turn them into customers ( and the more customers you’ll turn into your brand promoters ).

Big Truth Messaging

In a marketplace characterized by more choice than most people can handle, marketing communication is at crossroads. The challenge is to fight through the incredible amount of apathy already lingering in the air. So whatever you're selling, unearth a Big Truth about it. What is the "single most important thought" that you want to communicate?

Big Truth messaging should start a meaningful one-to-one conversation with your target audience; lead them in a value-based direction, and begin to close the sale with a distinct call-to-action. Finding the delicate balance between education and selling goes a long way to creating a positive buying environment. Take a seat where your customer sits and always be answering the question “ What’s in it for me ?”

The best messaging is grounded in customer profiling. This allows companies to connect with customers logically and emotionally by demonstrating you understand what’s important to them, what concerns them, and what they want from your products. Articulates the most powerful features of a product or service and then directly link these features to benefits for your audience.

New Media

Digital convergence is advancing at an aggressive pace and smart marketers need to adapt to a convenience-driven, instant gratification customer culture. Traditional media outlets are being overtaken because of their inability to dial down and focus on niche markets or micro-verticals. Marketing is moving beyond a discipline of advertising and communication to one that focuses on building a relationship with the digital consumer.

Web-savvy amateurs are leveraging the power of information, even subverting the power of the corporate brand. Enter the blogosphere, social networking, podcasts, and viral marketing. Suddenly every customer has a news reel and megaphone to speak to minority interests and ultra-segmented consumers. These approaches bring an ability to pinpoint any debate—political, product or service. Momentum is shifting from institutions to individuals.

The fact is people are simply doing different things in different places at different times. Over 120 million people are going online for health and medical information (averaging seven visits per month). They are getting ready for, or drilling down after MD visits and researching drug information. They’re checking prices and looking for indicators about quality of care and clinical outcomes.

Actionable Transformation

Marketing is changing quickly. On a daily basis it’s moving in many new directions. It’s critical to think about these transforming influencers in the context of your business, but more importantly, put in place actionable strategies so you don’t get caught short in what promises to be a competitive, fast-moving marketing transformation.

Lindsay Resnick

312.419.1973

www.finelight.com